E-shopping is a cheaper option for immediate purchase

Mumbai-based Dipti Shrikant, a management post-graduate, was waiting to buy a touchscreen phone since she started working three months ago. But, she had not been able to save the kind of money she would require for it. However, she was surprised to get the phone (Samsung Galaxy Y-dual SIM) for Rs 1,350 per month, when the phone was priced at Rs 8,100.

How? While surfing through Flipkart.com, an e-commerce website, she learnt that gadgets can be bought on equated monthly instalments (EMIs). She lapped up the offer as the maximum retail price of the phone is Rs 8,990, which could come down by Rs 400 in shops and a little lower on websites.

Surprised? Yes, Shrikant did buy the phone at the market price while taking the easy payment option. There are also other websites that offer the EMI option. These include naaptol.com, tradus.com and buytheprice.com. These sites have tie-ups with banks like ICICI, HDFC, Citibank, Axis and Standard Chartered.

E-SHOPPING ON EMI

PROS..

Quick possession of goods

The repayment tenure can be chosen by the borrower

For short repayment tenures, portals bear the interest cost

Useful for buying expensive products

CONS..

You may have to bear the interest cost if you choose longer repayment tenures

And the interest needs to be paid in the first instalment

Payment upto Rs 5,000 do not qualify for EMIs

Many may wonder how these offers can be at par with the market price. Explains Sachin Singhal, head - e-commerce, naaptol.com, “If a buyer is ready to clear his/her EMI in six months (smaller terms), we bear the interest cost on the buyer's behalf."

Here's how it works. Assuming you made a purchase of Rs 10,000 from website A, you will get the e-tailer's offer to use the EMI route as you progress to the payment stage. There, you will be shown a table giving different EMIs for different tenures. You will also be shown the processing fee applicable for your purchase. For instance, buytheprice.com charges Rs 100 for EMIs to be paid over three months and Rs 500 for six months. Lastly, give your credit card details for deduction of funds.

But, if you choose a higher repayment tenure you will have to bear the interest cost and pay the same to the bank in the first month. Say, you buy a television worth Rs 12,000 and plan to repay it in 12 months or Rs 1,000 every month, the website negotiates the interest rate with the bank. Assuming the rate is 12 per cent, the interest will be Rs 1,440 as it is calculated on the product value. Hence, you will have to pay Rs 2,440 (Rs 1,000 + Rs 1,440) in the first month and Rs 1,000 thereafter for 11 months.

Some other sites that allow repayment over longer tenures also waive off interest cost but that might be built into the product price.

The good news is there is no interest charged for smaller tenures. But, there are caveats. Firstly, you need to check which banks have tie-ups with the website(s) as you cannot avail the EMI option if you don't own credit cards of those banks. And, there is a threshold only beyond which this option can be availed of. Like buytheprice.com allows EMI for purchase of over Rs 5,000.

But, what if your credit card company has not tied up with the e-commerce site? In that case, you are advised to research with these websites and buy it from the manufacturer's site directly. But, that could work out a tad expensive and you might not get freebies which dealers may be able to offer. Or, those looking for easy payment options could buy from electronic stores which give loans from non-banking finance companies. But, the interest cost is to be borne by you.

Larger appliances like, washing machines, refrigerators, air conditioners and televisions have seen good demand.